Case study: Self-build mortgage for city professional with deferred stock

The borrower

The client was a Managing Director at a highly reputable US bank who wanted to purchase a plot of land and fund the self-build development of a new modern primary residence in the Home Counties. The purchase was part of a wider development including other plots.

The problem

The client was looking to purchase the land for £1.5m and carry out a ground-up build for a fixed cost of £1.95m. The property was being purchased from the developer with planning permission but the client was able to take a bespoke approach to the internal configuration and finishes, potentially affecting the build cost throughout the project.

The client had a strong asset profile comprised of their existing property, cash deposits, a stocks and shares ISA, SIPP, vested and unvested stock, and private equity fund investments.

Their income incorporated a number of income streams including salary and bonus income in a foreign currency, restricted stock units (RSUs), retained stock and deferred cash. A large proportion of this income was discretionary, including deferred RSUs which had a changing vesting period ranging from 3-5 years.  This added complexity to the income treatment and impacted their affordability profile for the loan.

The solution

Investec undertook a detailed analysis of the client’s varying types of income, along with a more detailed analysis of the stock price at the client’s firm.

The loan was split into two parts: part 1 was used towards the purchase and secured initially by the land; and part 2 towards the development of the property.

Investec provided 100% of the development costs to the client. The loan was provided on the basis of a loan-to-gross-development-value (LTGDV) of 67% and Investec held a cash contingency deposit of 12% of the value of the works to address any unforeseen circumstances.

The loan was provided on a development basis but also reverted to a normal mortgage structure after the completion of the works to provide the client with peace of mind.

The client was left with sufficient assets, post purchase liquidity and excess income for repayment of the mortgage, along with the means to fund their Private Equity capital commitments.
 

Important information

Your property may be repossessed if you do not keep up repayments on your mortgage. Investec residential mortgages are only available for residential properties in England or Wales and are primarily available to UK residents and subject to eligibility.